E8-29334. Social Security Disability Program Demonstration Project: Benefit Offset Pilot Demonstration

AGENCY:

Social Security Administration.

ACTION:

Notice.

SUMMARY:

We are announcing our plans to terminate the Benefit Offset Pilot Demonstration (BOPD) project, which relates to the disability program under title II of the Social Security Act (the Act). In this demonstration, we are testing modifications to current program rules that apply to working title II disability beneficiaries. We are also modifying current rules for making outcome payments to providers of services under the Ticket to Work and Self-Sufficiency program (Ticket to Work program).

DATES:

Effective Dates: Effective January 1, 2009, we are terminating the alternative program rules for treatment group participants of the BOPD who have not completed their trial work periods as of December 31, 2008. We are continuing the alternative program rules for treatment group participants of the demonstration who have completed their trial work periods as of December 31, 2008, until they complete their 72-month reentitlement periods.

FOR FURTHER INFORMATION CONTACT:

Mark Green by e-mail at [e-mail], by telephone at [phone], or by mail at Social Security Administration, Office of Program Development and Research, 3-E-26 Operations Building, 6401 Security Boulevard, Baltimore, MD 21235.

SUPPLEMENTARY INFORMATION:

We are conducting this project under the demonstration authority provided in section 234 of the Act.

Treatment of Work Activity Under Current Title II Disability Program Rules

Section 222(c) of the Act and 20 CFR 404.1592 provide title II disability beneficiaries with a 9-month trial work period. During the trial work period, a title II disability beneficiary may test his ability to work and still be considered disabled.

Sections 223(a)(1) and 202(d)(1), (e)(1), and (f)(1) of the Act provide that a title II disability beneficiary can continue to test his ability to work for an additional period immediately following completion of the 9-month trial work period if his disabling impairment continues. This additional period, known as the reentitlement period, ends after 36 months or when the individual ceases to have a disabling impairment, whichever is earlier. Under these sections of the Act, a title II disability beneficiary's entitlement to benefits will not terminate due to his performance of substantial gainful activity (SGA) during the reentitlement period. However, section 223(e) of the Act provides that, subject to a “grace period” (described below), we will not pay benefits to the disability beneficiary or anyone collecting benefits on his account for any month in which he performs SGA during the reentitlement period. Sections 404.401a and 404.1592a of our regulations reflect these provisions of the Act.

We will find that the beneficiary's disability ceased in the first month he performs SGA after the trial work period (§ 404.1592a(a)(1)). If we determine that his disability ceased after the reentitlement period ended, then entitlement to and payment of benefits terminates with the second month after the month disability ceased. If the month disability ceased due to performance of SGA occurs during the reentitlement period, different rules apply. In that situation, we will find that entitlement to disability benefits terminates in the first month after the end of the reentitlement period in which he engages in SGA (§ 404.1592a(a)(3)).

If we determine that a beneficiary's disability ceased during the reentitlement period because he performed SGA, we will pay benefits for the first month after the trial work period in which he engages in SGA and for the two succeeding months, whether or not he performs SGA in those months (§ 404.1592a(a)(2)). This three-month period is the “grace period.” After the grace period, we will not pay benefits for any month during the reentitlement period in which the beneficiary performs SGA. However, we will pay benefits for any month during the reentitlement period in which the beneficiary does not perform SGA. When we determine whether a beneficiary performed SGA in a month after the grace period, we consider only his work in, or earnings for, that month. We do not apply the rules regarding averaging of earnings or unsuccessful work attempts.

The Benefit Offset Pilot Demonstration

Section 234 of the Act directs us to carry out experiments and demonstration projects to determine the relative advantages and disadvantages of various alternative methods for treating work activity of title II disability beneficiaries. Under Section 234, we may waive compliance with the benefit requirements of title II of the Act and the requirements of section 1148 of the Act, as they relate to the title II program, insofar as is necessary for a thorough evaluation of the alternative methods under consideration.

On August 1, 2005, we began a pilot demonstration testing the effects of applying a benefit offset as an alternative to the current rules for treating the work activity of a title II disability beneficiary who has completed a 9-month trial work period. Under the benefit offset in this demonstration project, we reduce disability benefits $1 for every $2 a beneficiary earns above the SGA threshold amount instead of stopping benefit payments.

We implemented the BOPD for the following reasons:

• To test the effectiveness of modifications to current program rules in encouraging title II disability beneficiaries to return to work or increase their earnings; and
• to obtain information that we can use to assist in developing a more expansive benefit offset demonstration project, which we plan to conduct at nationally representative sample sites.

We entered into contracts with Connecticut, Utah, Vermont, and Wisconsin to assist us in conducting this pilot demonstration to test a benefit offset in concert with various support services and to obtain information to help in the planning phases of the national demonstration project.

Alternate Title II Program Rules for Participants in the Treatment Group of the BOPD

For this demonstration project, we have waived certain provisions relating to the reentitlement period contained in sections 223(a)(1) and (e) and 202(d)(1), (e)(1), and (f)(1) of the Act and in 20 CFR 404.401a and 404.1592a. We have also waived continuing disability review (CDR) requirements under section 221(i) and related provisions of the Act and 20 CFR 404.1589 and 404.1590. Certain title II disability beneficiaries participate in a treatment group of the BOPD. We provided these beneficiaries the opportunity to take advantage of the following alternate program rules.

• For a disability beneficiary who completed a trial work period and whose disability ceased during his reentitlement period because he performed SGA, we pay disability benefits for months after the grace period and during the reentitlement period in which the beneficiary does SGA, subject to application of a benefit offset. Under the offset, we reduce the amount of the monthly benefits by $1 for every $2 the beneficiary earns above the SGA threshold amount. Using our current title II program rules, we determine the amount of monthly title II disability benefits that would have been payable to the beneficiary had he not engaged in SGA. We then apply the benefit offset to this monthly benefit amount.
• We consider the beneficiary's earnings on an annual basis in applying the benefit offset. We use averaging to determine whether the beneficiary's average monthly earnings are above the SGA amount and, if so, calculate the monthly benefit amount. We pay benefits based on the beneficiary's estimated annual earnings and make necessary adjustments when the year ends, or sooner if relevant information is available.
• We provide a reentitlement period of up to 72 months. The reentitlement period ends the last day of the 72nd month following the end of the trial work period or with the month before the first month that the impairment no longer exists or is no longer disabling, whichever is earlier.
• We do not begin a CDR for a beneficiary participating in the treatment group either before or during his extended reentitlement period.
• For persons entitled to dependents' benefits based on the earnings record of a disability beneficiary participating in the treatment group, we may pay dependents' benefits for months in which the disability beneficiary performs SGA after the grace period and during his reentitlement period. We pay monthly dependents' benefits that would have been payable had the disability beneficiary not engaged in SGA.

Alternate Ticket to Work Program Rule Under the BOPD

Under the Ticket to Work program, we may pay outcome payments to a provider of services to whom a title II disability beneficiary has assigned a ticket. Section 1148(h) of the Act and 20 CFR 411.525 provide that we pay outcome payments only for those months for which we do not pay benefits due to the beneficiary's work or earnings. We have waived this requirement in order to provide an alternate rule for paying outcome payments to a provider of services to whom a beneficiary in the treatment group has assigned a ticket. Under the alternate rule, we may pay outcome payments for months in which the beneficiary has earnings above the SGA amount. We may pay an outcome payment even though we reduce the benefit payment because of earnings instead of stopping the payment.

Terminating the Alternate Rules for BOPD Participants Who Have Not Completed Their Trial Work Periods

In the BOPD, we have been testing the overall effects of a benefit offset under the title II disability program, including its effectiveness in encouraging disability beneficiaries to return to work and its impact on agency operations. We have been gathering information regarding the effect of the availability of a benefit offset on beneficiaries' efforts to work or increase their earnings. In addition, we have been evaluating our procedures to administer the benefit offset under the BOPD. Based on this evaluation, we have concluded that the process developed for administering the benefit offset under the BOPD is inefficient and administratively burdensome.

We have used the information obtained from this pilot demonstration to develop and refine a national benefit offset demonstration project. Over the course of this pilot demonstration project, we shared significant data and analysis with the design contractor for the national demonstration project. Based on this information, the design contractor extensively modified its design proposals. We have concluded the contract for design of the national project, and we are developing a system to provide an efficient method for administering a benefit offset provision under the national demonstration project.

Because the process we developed for administering the benefit offset under the BOPD proved to be inefficient and administratively burdensome, we are curtailing this pilot demonstration project. We are terminating the alternate rules for participants who have not worked long enough or at a sufficient level to qualify for the benefit offset provision. Effective January 1, 2009, we are terminating the alternate title II disability program rules and the alternate Ticket to Work program rule, for participants in the BOPD treatment group who have not completed their trial work periods by December 31, 2008. We will continue the alternate rules for participants in the treatment group who have completed their trial work periods by December 31, 2008, and therefore are eligible for the benefit offset, until these beneficiaries complete their 72-month reentitlement periods.

Dated: December 5, 2008.

Michael J. Astrue,

Commissioner of Social Security.